A new report from Health Canada reveals that the high fees imposed on Canadian cannabis companies are preventing the industry from making a profit.
The report, titled “2021-2022 Review of the Cannabis Cost Recovery Framework,” aims to inform progress in achieving key policy objectives for the legalization of cannabis in Canada to support “a diverse and national”.
Under current regulations, cannabis companies are subject to taxes, implemented to help Health Canada recover regulatory costs. These fees include application review, security clearance and import and export permit fees, as well as an annual regulatory fee.
The report shows that respondents said fees contribute to “difficulties in achieving profitability and positive cash flow, which are already under significant pressure.”
A total of 37.5% of micro-license holders (max 200 m² of grow space), compared to 20.5% of standard license holders, said the fees accounted for more than 10% of operating costs .
The report states that “Fees collected under the order may have a greater impact on small farms than on their larger competitors, due to economies of scale. »
“It is also important to note that the licensees surveyed in the micro license and standard license categories represent licensees at various stages of development, from start-ups with no revenue to large-scale licensees. who operate throughout the Canadian market. »
Additionally, the report found that annual regulatory fees represent 90.5% of all cannabis duty revenue collected by Health Canada between 2018 and 2019 and between 2021 and 2022.
In this regard, 10 micro licensees and 12 standard licensees stated that the minimum annual regulatory fee is prohibitive “especially for licensees who have no sales revenue”.
Many small cannabis businesses are now struggling to survive, if not already shut down. Small cannabis producers are thus pushing for a reform of the excise tax in Canada that would allow them to generate a minimum of profits.
